Jill Kerby

There has been a significant deterioration in the solvency of defined benefit schemes; over 200 construction firms that haven’t forwarded their worker’s contributions to their industry pension scheme are being investigated and some serious investment mistakes have been made by too many scheme trustee, the Pensions Board reported last week.  

Oh, and the Pensions Green Paper – which has been gestating now for four years – is still languishing somewhere at the bottom of the Cabinet’s in-tray. 

The Green Paper should have turned into legislation long before now:  and numerous deadlines have come and gone. But there is now growing concern that one of the most crucial, driving factors in the pension system – the €2.9 billion tax relief on annual pension contributions and/or the tax free element of matured pension funds, will be targeted by the Commission on Taxation in its upcoming report. 

Get the tax relief element wrong, say pension experts, and it is probably fair to say that the entire review procedure, which began at the instigation of the late Seamus Brennan in 2005 when he was Minister, may have to begin afresh. 

Pensions reform is a complicated, massive undertaking but we are inordinately slow in this country in taking necessary action.  (The previous major pension reform began in the early in the early 1990s took over six years for it to become legislation.) 

Meanwhile, as a result of the economic crisis of the past year, and the impact this had had on underfunded pension schemes, the Minister for Social and Family Affairs and the Pensions Board have recently introduced piecemeal, emergency changes to the pension funding standard and to the treatment of insolvent pension funds; these too, say pension consultants, could overtake some of the recommendations made in the Green Paper and the subsequent National Pension Review. 

But it will be the government’s decision about tax relief that holds the key to the long term future of private pensions, say consultants. If it is reduced to the standard rate only, where is the incentive for someone paying the higher, marginal tax rate?  

Today, whatever about the poor investment performance of your pension fund, or the funding problems that your employer may have experienced, at least there was only going to be single tax liability – and then, only on the retirement income itself. 

The nearly three billion euro that the government has foregone from pension contribution relief is money that is now being borrowed just to meet payroll costs and keep the lights burning in Dail Eireann.   

In light of this, the only pension reform you should count on over the short term is the kind you end up doing yourself. 

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Officials at the two genuinely private health insurance companies here, Quinn- Heathcare and Hibernian Aviva Health, say they are deeply disappointed that the EU Competition Commission has upheld the €160 and €53 levy on all adult and child members in order to subsidise the VHI and its disproportionate number of older members. 

This risk equalisation measure-by-stealth, as one official calls it  (last year the Supreme Court threw out risk equalisation payments as defined by the Department of Health), means that the government is off the hook from having to reform the VHI, say its critics.  The wholly owned state insurer continues to operate outside the normal solvency rules that Quinn and Hibernian Aviva must trade under, and the levy is going to further discourage any further competition within the market, they say.  

The long and short of it is that so long as the VHI continues to have the legacy costs from the days when it was a monopoly, and that will continue so long as its very first members from the 1960s keep ageing, everyone with health insurance will have to make a sizeable annual contribution to keep the VHI in business.

Quinn and Hibernian, who were not consulted over the levy, say there is now no incentive for VHI to manage its costs more efficiently, and as all the health insurers lose members due to the recession, there’s a real risk that the VHI’s legacy costs will keep rising: older members have more incentive to keep their membership than younger ones or families whose state of health is better but whose incomes are under a greater strain. 

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Having already been the victim of electronic bank fraud I’ve become extra wary about the way I conduct electronic banking transactions or pass on my bank details, especially to on-line retailers.  

A year ago last January, over €4,700 was spent, on-line, on my current account debit card in the space of a week.  My debit card account number was generated randomly by a savvy cyberspace gang and then matched – by chance - to my bank’s ID code, which is public information.  Bingo! 

The fraud happened because the crooks know how to break through the banks’ electronic bars. Worldwide, a lot more money goes missing now using the new electronic break and entry methods than the old fashioned, real-time, sawn off shotgun and balaclava way.   

This is why I don’t have a lot of sympathy for IPSO, the Irish banks’ payment services organization, who have complained in their latest report that we are very slow here in Ireland to embrace electronic payment and transfer and are stubbornly attached to trading with cash. 

Also, perhaps they need to have a little chat with a few of the 70,000 Bord Gais customers – me again – whose bank details are now in the hands of the thieves who stole unencrypted Bord Gais laptops. 

They may not have been very cost effective, but ‘hard copy’ bank accounts certainly felt a lot safer.